Can Your Holiday Profits Weather the Storm of Carrier Surcharges?

Do you hear the distant sound of sleigh bells? With summer officially behind us, it’s time to get serious about your holiday parcel shipping plans. As this blog posts, there are just 64 days remaining until Black Friday kicks off the official holiday shopping season on November 29.   

In an earlier blog post, we briefly discussed the importance of understanding and controlling your parcel shipping costs during the busy holiday season. But it’s time to take a closer look at the new surcharges carriers are unwrapping as Christmas, Hanukkah, and Kwanzaa get closer. 

Like an unexpected blizzard on December 24, the recent flurry of surcharges from UPS and FedEx could ruin your carefully laid parcel holiday shipping plans — as well as your profit margins. Since you probably don’t have a trusty, red-nosed reindeer to guide you through the upcoming storm of new carrier fees, our best advice is to be prepared in advance.   

In this blog, we’ll review some frequently asked questions about these parcel carrier surcharges. If you have questions outside these FAQs, don’t hesitate to contact Redwood. Now let’s dash away and get right to your most pressing concerns. 

What exactly is a peak-season surcharge? 
Most carriers, including UPS and FedEx, add peak-season surcharges during periods of high demand. These additional fees, which are stacked on top of base parcel shipping rates, are in theory designed to help carriers compensate for stretched capacity, strained operations, employee overtime, and other business pressures. In reality, they’re also a move to earn extra income from shippers who need to get their parcels delivered to meet their own peak demand. 

When do peak-season surcharges begin and end? 
This is a trickier question. And the answer is, “It depends.” FedEx has publicly stated that its peak-season surcharges end on January 19, 2025. But UPS is more vague, saying only that the new fees will be applied “until further notice". This means you could be unknowingly paying peak-season shipping surcharges well into the summer — and beyond — if you’re not paying close attention. At Redwood, we’ve noticed that, even with a stated end date, carriers tend to keep charging these elevated parcel shipping rates after the holidays. Historically, shippers might be seeing their rates rise incrementally every year, as annual “holiday” surcharges are generally just tacked on into infinity — essentially representing a new base rate. 

Are there any other hidden carrier fees I should be aware of? 
Yes, Virginia, carriers do impose other subtle but significant fees in addition to their published peak-season surcharges. UPS recently announced new fuel surcharges, followed quickly by FedEx. Parcel carriers began imposing fuel surcharges about 20 years ago to protect their own margins in the face of fluctuating fuel prices. Since then, tacking on these surcharges has become a quiet way for carriers to grow margins and revenue, without changing their posted “base” rates or altering their existing customer contracts. New carrier fuel charges are especially suspect right now, as fuel prices are actually dropping in the US.  

How can I manage and mitigate these additional costs? 
Here’s the thing about parcel carrier surcharges: Like an early snowfall, they can sneak up on you. These extra fees apply to different time periods, package sizes, zip codes, delivery types…the list goes on and on. The best advice we can give is just to pay close attention. Gather data on carrier base rates, surcharges, service offerings, and shipping deadlines from both established and new carriers. Look at your existing carrier contracts and parcel shipping volumes. Analyze your customers’ zip codes, your average packages sizes, and other aspects of your holiday shipping. Don’t forget to consider your returns and reverse logistics. And look closely at how well your established carriers have performed in the past. Don’t be afraid to take bold steps like changing the carrier mix and renegotiating contracts. 

All our elves are busy in the workshop. We just don’t time to deal with this.
At Redwood, this is the most common response we hear from parcel shippers. And it’s understandable. You have enough going on in your core business, without hiring experts or asking overworked employees to take on new responsibilities. The problem? You really can’t afford to overlook the potential cost savings of conducting a parcel shipping analysis. That’s why Redwood created its Parcel Advisory team, which includes former professionals at FedEx, UPS, and other carriers. They’re already up to speed — and ready to evaluate your shipping spend, carrier mix, customer commitments, and other aspects of your holiday parcel shipping plans. They can also coach you on rate and contract negotiation to help deck your halls with better cost and service results. On average, shippers save an average of 12% in costs when they begin working with Redwood — and the benefits only grow over time. 

From a Storm of Fees to a Winter Wonderland of Profitability  

It’s easy for shippers to feel overwhelmed and powerless in the face of this blizzard of base rates, surcharges, and hidden fees. But, with a little Christmas magic — and a helping hand from Redwood — you can transform these challenges into a profitable holiday season. The secret is being informed, then leveraging that knowledge as power.

Whether you choose to manage rate negotiations, holiday shipping schedules and other complexities on your own, or leave the sleigh driving to Redwood, we’re confident you can ring in 2025 with improved parcel shipping rates and margins. Increase your chances by reaching out to Redwood before the snowflakes start to fly.

Check out our Redwood Parcel Holiday Shipping Guide page for all the latest insights.